IRS overhaul bill advances to House, approval expected Senate is not likely to address measure until early next year

October 23, 1997|By NEW YORK TIMES NEWS SERVICE Sun national staff writer David Folkenflik contributed to this article.

WASHINGTON -- The House Ways and Means Committee overwhelmingly passed legislation yesterday intended to bring sweeping changes to the Internal Revenue Service, with members of both parties saying the bill would protect taxpayers and impose new management standards on the tax-collection agency.

"It's going to be the most dramatic change at the IRS in 50 years," said Rep. Benjamin L. Cardin, the Baltimore County Democrat who co-sponsored the measure despite early opposition from many of his Democratic colleagues.

"This is going to happen."

The Ways and Means Committee passed the overhaul proposal 33-4 yesterday afternoon, only a day after the White House withdrew its opposition to the plan.

"I've never seen something change so quickly in such a short period of time," said Cardin, who participated in a flurry of calls last weekend with Treasury Secretary Robert E. Rubin try to win the Clinton administration's support.

The bill now goes to the full House, where it is likely to pass by a wide margin before Congress recesses next month.

Despite growing pressure for the Senate to take up a similar measure this year, Sen. William V. Roth Jr. of Delaware, the chairman of the Finance Committee, said he would not have legislation ready to vote on until early next year. Yesterday's vote in the Ways and Means Committee came a day after the Clinton administration's decision to drop its opposition to the bill, which had already picked up considerable bipartisan support.

All of the committee's 23 Republicans voted for the bill, as did 10 of the 16 Democrats. Two Democrats did not vote.

The biggest change contained in the measure would be the creation of an oversight board -- dominated by private citizens who would be appointed by the president and confirmed by the Senate -- that would have broad authority over the IRS' strategy, operations and budget.

The bill also would shift the burden of proof in tax-court cases by forcing the IRS, rather than the taxpayer, to show that its calculation of a tax liability is correct. The measure is intended to address the perception that current law in effect considers the taxpayer guilty until proven innocent when confronted by the IRS.

In addition, the bill contains more than two dozen narrowly drawn provisions intended to help taxpayers. They include:

Making it easier for taxpayers who win cases brought by the IRS to collect legal fees.

Providing for up to $100,000 in civil damages in cases where the IRS is found to have acted negligently in pursuing taxpayers.

Extending to accountants and other tax professionals the same privilege of confidentiality enjoyed by lawyers in dealing with clients.

Increasing money for clinics that help low-income taxpayers.

Although none of the bill's provisions would radically change the relationship between taxpayers and the IRS, the legislation's supporters said they hoped that the measures would send a clear signal both to the public and to the IRS that the agency would have to become less arrogant, less prone to abusing and intimidating taxpayers and more focused on helping people resolve tax problems.

"It is designed to produce a new IRS that more closely resembles a modern financial services organization than an enforcement-minded, bureaucratic dinosaur," said Republican Rep. Rob Portman of Ohio, one of the bill's main authors.

Cardin said he agreed to be the Democratic sponsor of the IRS overhaul bill with Portman because he wanted to eliminate voter frustration at the tax agency as an issue when Congress resumes debate on how best to structure the tax system itself.

"Sure, I'm going to disagree on policy with a lot of the people that I worked with on this bill," Cardin said. "But we're going to have a good debate" because of this bill.

Republicans hope to use the issue as a springboard to scrapping the entire income-tax system and replacing it with a single-rate flat tax, a national sales tax or some other alternative. House Speaker Newt Gingrich of Georgia and Sen. Trent Lott of Mississippi, the Republican leader, pledged to a small-business group yesterday to end the current system by 2001.

Although the administration repeated yesterday that the House bill is acceptable to President Clinton, White House and Treasury officials said they continue to believe they can change the bill in some substantive ways, probably when it is taken up in the Senate next year. In particular, the administration would like to water down some of the powers of the new IRS board.

The administration was swamped in the past few days by the political reality that the bill was going to pass the House by a large margin and the White House was at risk of coming off as an obstinate defender of an agency that has no political constituency.

The administration also largely put aside its concerns over the shift in the burden of proof away from the IRS. But Donald Lubick, the acting assistant Treasury secretary for tax policy, told the Ways and Means Committee yesterday that he remained concerned that the provision could make it easier for taxpayers to avoid paying their full tax bill.

Pub Date: 10/23/97

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